STRATEGIC IMPLEMENTATION

Management Strategy

Objectives

• To study the process of strategy implementation
• To know how corporate and function performance is measured
• To study the problems encountered in performance measurement
• To know the process of exercising control in corporate development

Introduction

• Select strategy out of available alternatives and important stage of strategic management.
• Evaluation of implementation and control of the whole process
• Control can be exercised or review can be planned
• It is the basis of control, its feedback and review is made on the feedback.

Strategy Implementation

It is the total of the activities and choice required and execution

Strategies and policies are put into action through development.

What is does and how is does to understand the strategic implementation.

Who implement the strategic plan

Industrial Firms: Manager/Supervisor covering their own work.

Business Units: Head of the Division/ Product.

Medium Units: Section Head or Subordinate Managers

Organizations: Managerial Staffs/Co Supervisor of the particular area of specialization.

Implementation Strategy Set Up

• BOARD OF DIRECTORS

Corporate strategy Formulations

• TOP MANAGEMENT 

Corporate Strategy of Implementation & Business Strategy Formulation

• DIVISIONAL MANAGEMENT

Business Strategy Implementation
Functional Strategy Formulation

• SECTION/DEPARTMENT MANAGEMENT

Functional Strategy Implementation

What is Strategic Implementation Plan

• Development of programme budget and procedures
• Gaining synergy among division and functional section and maintain competencies in division.
• Development of relevant programme to create respective objective at each level
• Allocate budgetary provision for the existing and new activities.
• Modifying the existing and new procedures to suit the strategic plan
• Establishing synergy among divisions to achieve the required change

PROGRAMMES

Statement or steps needed to accomplish the strategic plan
Create different set of activities for different stages in the plan
Synergy between the departments to modify the functions.
Do not try to imitate the existing programmes or designed by top management.

BUDGETS

The preparation of budget should follow the programmeBudget and programme are prepared by same person, unless costing are made at different section.
It is the statement of proposed expenditure and expected return out of specific programme.
Necessary flexibility to be provided to caution the operating variations.

IMPACT OF PROGRAMME

• Procedures

Require clear expression of procedures
Modification of existing procedures to suit the plan.
Redesigning the plan such as packing redesigning or advertisement method for improving the

Improvement in the production procedures with slight alteration.

• Achieving Strategy

Synergy between the functions in the business units to be achieved
Improvement in the return of investment is greater then compared to what it was earlier.
Shared or combined benefits are higher than the individual benefits

• Coordinated Strategies

Coordinated response to common competitors

• Shared Tangible Resources

Sharing common manufacturing facility or R & D.
Reduce Inventory by streamlined flow of service product/service, improve market access.

• Pooled Negotiating Power

Combining purchase power over common supplier to reduce cost and improve quality

• New Business Creative

Exchange of knowledge and skills facilitating new products and establishing new venture.

EVALUATION AND CONTROL

• Actual performance is compared with desired performance by firm’s activities and performance result.
• Corrective action and resolve problems for desired result

• Performance: 

Final result of activities
Improve in organization’s performance are measured in terms of profits and returns on investments.

• Evaluation and Control Process

Achievement which is set out to accomplish
Performance of desired results and provide result necessary to evaluate result and corrective steps

EVALUATION AND CONTROL

• Determine what to measure

Specify what result to be monitored and evaluated
Measure reasonably object in consistent manner.

• Standard of Performance 

Expression of strategic activities
Measure acceptable result
Find final output and intermediate stage of production output.

• Measurement of Actual Performance

Data and activity report on measurement of performance

• Performance Comparison

Identify the performance result and control to fall within the acceptable range.

• Corrective Action

Initiate the correction of deviation, if the result fall short of standards.

MEASUREMENT OF PERFORMANCE

• It is the final result of the activity

• Objective formed (Dealing with profitability, market share cost reduction) is measured for corporate performance.

• Evaluating firm’s division ability to achieve profitability objective by studying return on investment.

TYPE OF CONTROL

• Actual performance result (outputs)

• Activities to generate the performance (behavior)

• Resources that are used in performance (input)

• Output control specify what is to be accomplished focusing on end result of behaviors

• Behavioral skills specify how something is to be done through policies, rules and procedures and orders from superiors.

• Input controls focus on resource such as knowledge skills, abilities, values and motive of employees.

PRIMARY MEASURES OF CORPORATE PERFORMANCE

• Return on investment (ROI)

ROI = Net income after tax
Total asset

• Earnings per share (EPS)

EPS = Net Earnings
No. of Shares

• Return on equity (ROE)

ROE = Net Income
Total equity

• EPS does not consider these value of money

• EPS can have several different but equality acceptable values

• ROI can be easily maintained

• Time span for ROI measurement is very short

• EPS AND ROE are unrelated to stock price.

• STAKEHOLDER CATEGORY

• POSSIBLE NEAR TERM MEASURE

Sales (Value and Volume)
New Customers
Number of new customer
Needs Met (tries)
Customers

• POSSIBLE FAR TERM MEASURE

Growth in sales
Turnover of customer base
Ability of Control Price

• STAKEHOLDER CATEGORY

Suppliers

• POSSIBLE NEAR TERM MEASURE

Cost of raw materials
Delivery time
Inventory
Availability of raw materials

• POSSIBLE FAR TERM MEASURE

Growth rate of raw materials
Delivery time
Inventory

New ideals from suppliers

• STAKEHOLDER CATEGORY

Financial Community

• POSSIBLE NEAR TERM MEASURE

Earning per share
Stock Price
Number of “buy” lists
Return on equity

• POSSIBLE FAR TERM MEASURE

Ability to convince wall street
Growth on Return on equity

• STAKEHOLDER CATEGORY

Employees

• POSSIBLE NEAR TERM MEASURE

Number of suggesting
Productivity
Number of grievances

• POSSIBLE FAR TERM MEASURE

Number of internal changes
Promotion
Turnover

• STAKEHOLDERS VALUE

• etter measure of corporate performance and effectiveness.

• Shareholder value is present value and anticipated future stream of cash flow from business

• Their value is the value of its cash flow discounted back to their present value fusing cost of capital.

ECONOMIC VALUE ADDED (EVA)

Difference between pre-strategy and post strategy of the business

EVA = Operating income after tax – (investment in assets x weighted

cost of capital)

Cost of capital = Cost of debit and cost of equity

If EVA is positive Strategy is generating value for shareholder

If EVA is negative Strategy is destroying value for shareholder.

EVA can be improved by measures

Earnings more profit without using more capital

Using less capital

Investing capital on high return project

MARKET VALUE ADDED(MVA)

Difference between market value of company and capital contributed by share holder and tenders

Steps in calculating data

• Add all capital of company from shareholders and bondholders

• Add some investments on future earnings

• Using current stock price, total the value of all outstanding stock. Add it to the company debit. That is company’s market value

• MVA is difference between capital and market value

• Positive MVA indicates has created wealth (market > capital)

• Negative MVA indicates strategy has destroyed share holders wealth (Market < capital)

RESPONSIBILITY CENTRES IN ORGANISATION

There are five types of responsibility centers in organizations

1. Standard Cost Centers
2. Revenue Centers
3. Expense Centers
4. Profit Centers
5. Investment Centers

1. STANDARD COST CENTRES

Primarily related with manufacturing facilities
Standard cost are computed on data's
Expected cost is compared with actual cost of production.
Expected cost of production is calculated based on standard cost and number produced, actual cost is the cost of production from the book of accounts

2. REVENUE CENTRES

Production or sales are measure in number of units or value of units Salaries and other operating cost of earnings are ignored

3. EXPENSE CENTRE

Resources are measured without consideration for service or product cost
Administrative expenses and service expenses are included. They are indirectly contributes to revenue.

4. PROFIT CENTRE

The performance is measured in terms of difference between revenues and expenditure

Control over its resources and products services. Higher level or organisations profit centre can be created depending on policy of accounting

Manufacturing department can be converted from standard cost centre to a profit centre-comparing cost of production and expected revenue from transfer price.

Transfer price is a price on product it sells to sales department

5. INVESTMENT CENTRES

Using significant assets for making products, assets base needs to be factorized into performance evaluation. It is measured in terms of difference between its resource and its service products.

Return on investment is the measure to assess the performance in investment centre
Combination of cost expenses and revenue centers to make the budget.

Combinations of cost, expense, revenue and profit centre, they also emphasize on investment centre.

BENCHMARKING FOR PERFORMANCE EVALUATION

• It is continual process of measuring products, service and practices against toughest competitors or market leaders.
• Benchmarking is based on the concept some that already is use

• It involves open learning how others do something better than one’s own company or to improve their current technique.

PROCESS:

–  Identify the area or process to be examined, to determine the potential and competitive advantage.

–  Find behavioral and output measure of the area of process.

–  Select an accessible act of competitors and best companies against which benchmarking is done.

–  Calculate the difference among company’s performance and those of competitor leader and find out why different exists

–  Develop tactical programme for closing performance gaps

–  Implementing tactical programme and compare the resulting new measurement with those of market leader.